Uranium play Okapi Resources is set for a big catch up

Behzad Golmohammadi Behzad Golmohammadi, April 8, 2022

Okapi Resources (ASX: OKR) owns uranium assets in the US and Canada, including the Tallahassee uranium project with a mineral resource estimate of 49.8 million pounds of U3O8 at a grade of 540ppm located in the Tallahassee Creek Uranium District in Colorado. The company’s other assets include an option to acquire 100% of the Rattler Uranium Project in Utah, located only 85km from the White Mesa Uranium Mill, which is the only conventional uranium mill operational in the US.

 

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We believe with current the soaring uranium prices, Okapi Resources with its large uranium assets offers a great value at a small $35m market capitalisation.

 

Another rally in uranium prices means another rally in Okapi Resources’ share price

Let’s see what moved Okapi Resources’ share price since July 2021.

Okapi

Okapi Resources, Daily Chart in Semi-log Scale (Source: Metastock)

 

❶ Okapi Resources acquires 100% of Tallahassee Resources Ltd, which holds a portfolio of uranium projects in the US, including the Tallahassee Creek Project in Colorado, US.

❷ Increasing uranium prices lift the share price.

❸ Consolidating uranium prices lower the market’s attention to the stock.

❹ Rock chips assays at Rattler Uranium Project return significant prospects.

❺ Another uranium deposit acquisition increases the estimated resource size at the Tallahassee Uranium Project by 81% to 49.8 million pounds of U3O8

 

Okapi Resources joined the uranium industry at just about the right time. Soon after the company acquired its portfolio of uranium assets, uranium prices rallied from approximately US$30/lb to more than US$50/lb. This led to an uptrend in OKR’s share price, which took it to a high of 80 cents. For the next 5 months, uranium prices consolidated their gains, which took the momentum out of OKR’s share price, pulling it down to a low of 22 cents.

Another rally in uranium prices has started in February 2022, which at the time of writing, has taken the uranium price to more than $60/lb. This has created a positive sentiment surrounding uranium plays, including Okapi Resources and we believe the company is well-prepared to take advantage of the opportunity.

Okapi announced exciting assay results from the Rattler Uranium Project in March, which drove OKR’s share price its recent low (point 4 on the chart). The recent announcement of the increased estimated resource size of the Tallahassee Uranium Project pushed the share price upwards through the declining trend line (point 5 on the chart), which is a bullish sign.

 

We expect Uranium prices to go higher

Uranium prices came back to life in 2021 as many countries decided to become more carbon-neutral amid climate change, which increased the demand for nuclear fuel. Another demand shock for uranium took place after the Russian invasion of Ukraine as countries try to limit energy imports from Russia. Uranium prices recorded their highest levels since 2011 when the news came out that the US is working on banning imports of nuclear fuel from Russia.

We expect the current circumstances responsible for the surge in uranium prices to persist for the foreseeable future.

 

Okapi Resources is offering great value at the current market cap of $35m

According to the company’s announcement, Okapi’s estimated resource size of 49.8mlb puts it next to some of the bigger ASX’s uranium plays, including Boss Energy with a market capitalisation (MC) of $759m, Lotus Resources with a MC of $445m, Alligator Energy with a MC of $309m and Peninsula Energy with a MC of $224m. This makes Okapi Resources look very cheap at a MC of $35m.

 

The share price has some catching up to do

Additionally, from a technical analysis point of view, all these uranium plays have recovered to more than 50% Fibonacci level of the correction to their high prices recorded in September 2021. Meanwhile, OKR’s share price has only recovered about 25% of the correction to its high of 80 cents in September 2021. Therefore, Okapi Resources’ share price has some catching up to do.

 

How to play Okapi Resources’ stock

Following the company’s latest announcement the downtrend has been broken and the share price closed above the resistance level of 35 cents (the green line on the chart). This signals bullish sentiment on the stock. If the uranium prices hold up, we expect the share price to move to the 50% Fibonacci level at 50 cents (depicted on the chart) to partially catch up with its peers. If uranium prices keep soaring, we expect OKR’s share price to reach its September 2021 high of 80 cents in the next few months.

 

Stop Loss at 28 cents

On the other hand, if the share price falls below the previous swing low at 28 cents, we can say that the bullish sentiment is basically gone and the chances of any meaningful rally in the share price are low. So, our Stop Loss level is 28 cents.

 

 

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Frequently Asked Questions about Okapi Resources

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